If you were accepted to a selective college or job in the 90s, have you ever wondered if you’d get accepted in today’s environment? I wonder myself. It leaves me feeling grateful because I think the younger version of me would not have gotten into Cornell or SIG today. Not that I dwell on this too much. I take Heraclitus at his word that we do not cross the same river twice. Transporting a fixed mental impression of yourself into another era is naive (cc the self-righteous certain they’d be on the right side of history on every topic). Still, my self-deprecation has teeth. When I speak to friends with teens I hear too many stories of sterling resumes bulging with 3.9 GPAs, extracurriculars, and Varsity sport letters, being warned: “don’t bother applying to Cal”.
A close trader friend explained his approach. His daughter is a high achiever. She’s also a prolific writer. Her passion is the type all parents hope their children will be lucky enough to discover. My friend recognizes that the bar is so high to get into a top school that acceptance above that bar is a roulette wheel. With so much randomness lying above a strict filter, he de-escalates the importance of getting into an elite school. “Do what you can, but your life doesn’t depend on the whim of an admissions officer”. She will lean into getting better at what she loves wherever she lands. This approach is not just compassionate but correct. She’s thought ahead, got her umbrella, but she can’t control the weather.
My friend’s insight that acceptance above a high threshold is random is profound. And timely. I had just finished reading Rohit Krishnan’s outstanding post Spot The Outlier, and immediately sent it to my friend.
I chased down several citations in Rohit’s post to improve my understanding of this topic.
In the post, we tie together:
- Why the funnels are getting narrower
- The trade-offs in our selection criteria
- The nature of the extremes: tail divergence
- Strategies for the extremes
✍️ There’s Gold In Them Thar Tails: Part 1 (13 min read)
A collection of links
I’ve suggested multiple times on Twitter that someone should compile Matt Levine’s Money Stuff articles by topic and sell it as a book. RabbiJacob16 compiled all of Levine’s writing on his “Everything is Securities Fraud” theme and made it free.
This is an ancient post by crypto standards (1.5 yrs old) yet remains a lucid explanation of automated market-making. You’ll find lots of fun reading on Haseeb’s site regardless.
I also published 2 posts that are exhaust from an article I’m writing. I’ll publish that next week.
✍️Notes From Mauboussin’s “Who Is On The Other Side?” (7 min read)
These are notes from a report where:
Michael describes a taxonomy of inefficiencies, supported by a rich vein of academic research. The goal is to have a clear idea of why efficiency is constrained and why we believe we have an opportunity to generate an attractive return after an adjustment for risk.
✍️ On Contrarianism (3 min read)
A collection of quotes and ideas on the importance and difficulty of being contrarian.
From My Actual Life
I saw War on Drugs Friday night at Bill Graham in SF with Jake.
It’s Friday.. yeah pic.twitter.com/MieAkXK0Mk
— Jake (@EconomPic) February 26, 2022
The song Under The Pressure (below) is all rise, but when the drop comes, that’s an ethereal experience live. Both times I’ve seen WoD that moment stays with me.